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Feb. 22 — Justice Antonin Scalia died before the U.S. Supreme Court had a chance to hear legal arguments against the Environmental Protection Agency's Clean Power Plan, but the rule's opponents leaned heavily on the late jurist's words when crafting arguments against the rule.

States and industry groups leading the legal fight against the Clean Power Plan (RIN 2060-AR33), which limits carbon dioxide emissions from the power sector in each state, repeatedly cited Scalia's prior warning to the EPA about seeking new regulatory powers from existing statutes without explicit authorization from Congress in briefs filed Feb. 19 in the U.S. Court of Appeals for the District of Columbia Circuit.

The EPA's rule subverts the clear statutory language of the Clean Air Act by regulating how utilities generate electricity rather than setting limits on their emissions and by setting standards for existing units that are more stringent than those for new power plants, upending decades of Clean Air Act regulation, states, utilities and industries opposed to the rule argued in the briefs
(West Virginia v. EPA, D.C. Cir., No. 15-1363, briefs filed 2/19/16).

In a brief detailing core legal challenges to the Clean Power Plan, opponents keyed in on the way the EPA pushed utilities to reduce emissions through investments in new renewable generation or shifting load from coal-fired units to less polluting natural gas plants as examples of the agency stretching its authority under Section 111(d) of the Clean Air Act to pursue—in the administration's own words—a “more aggressive transformation in the domestic energy industry.”

The Clean Power Plan's emphasis on generation shifting and new renewable generation oversteps authorities reserved for states under the Federal Power Act, opponents argued.

“Nevertheless, EPA seeks to usurp these important traditional state police powers,”
opponents of the rule said. “Until now, the states have determined for themselves the extent to which they should (or should not) mandate particular levels of renewable generation, balancing such generation’s benefits against other considerations, including the risks that energy dependent on weather events (such as wind speed, cloudiness, and snow cover) often pose to the grid’s reliability.”

The Clean Power Plan is being challenged by 27 states, as well as by several utility and industry groups. The Supreme Court stepped in Feb. 9 to stay implementation of the rule even before the D.C. Circuit heard oral arguments, which are scheduled for June 2 (West Virginia v. EPA, U.S., No. 15A773, 2/9/16).

Scalia Cautioned Against New Authorities

In Util. Air Regulatory Grp. v. EPA, Scalia cautioned the EPA that “[w]hen an agency claims to discover in a long-extant statute an unheralded power to regulate ‘a significant portion of the American economy'
... we typically greet its announcement with a measure of skepticism.”
Opponents of the Clean Power Plan in their opening briefs argue that is exactly what the agency is attempting to do with its authority under Section 111(d) of the Clean Air Act.

Section 111(d) requires the EPA to set “standards of performance for any existing source for any air pollutant” being regulated, but opponents of the Clean Power Plan argue that building new, cleaner generation or shifting to existing natural gas-fired units does not constitute setting a performance standard for the power industry.

“Requiring an owner or operator of a fossil fuel-fired source to construct, or to subsidize generation at, other facilities, as the rule does, is not a standard ‘for' that source at all,” they argued.

While the act requires the EPA to determine the “best system of emission reduction,” opponents of the Clean Power Plan argue that is limited to the types of pollution controls that can be implemented at individual power plants and cannot be broadly applied to the entire power sector in each state.

“This reading of Section 111(d) to permit standards based on ‘generation shifting' is unambiguously foreclosed by the language of the statute, established case law and nearly a half century of consistent administrative practice,” the states and utilities said.

Useful Life of Regulated Plants

Setting standards based on the entire power sector rather than individually regulated units also violates the Clean Air Act's requirement that states be allowed to take into consideration the remaining useful life of the regulated power plants, the opponents argued. By contrast, the new source performances standards the EPA issued for new and modified power plants under Section 111(b), which must be in place before it can regulate existing units under Section 111(d), set carbon dioxide emissions limits for individual facilities.

“[I]n EPA’s parallel rulemaking to establish standards of performance for new units under section 111(b), EPA determined that it could not read the term ‘best system of emission reduction' in section 111(a)(1) to set standards of performance based on shifts in generation from new plants to other sources with lower emissions but would consider only reductions that those plants could themselves achieve,”
the opponents argued.

The Clean Power Plan also stands the Clean Air Act on its head by setting standards for existing power plants that are effectively more stringent than those for new and modified units, upending decades of agency practice, the opponents said.

“Indeed, under EPA’s inconsistent reading of Section 111, the rule’s emission reduction requirements cannot be met even if every coal-
and natural gas-fired plant is closed and replaced with brand new plants using what EPA has determined to be state-of-the-art technology,”
they said.

In a separate brief addressing procedural flaws with the Clean Power Plan, opponents argued that the EPA has not demonstrated that its rule will achieve the desired carbon dioxide emissions reductions while still ensuring grid reliability.

“EPA bears the burden to show that its selected ‘best system of emission
reduction' has been adequately demonstrated to be reliable, efficient and not exorbitantly costly,” opponents argued. “EPA must also show the emission guidelines derived from that system are ‘achievable'
by individual sources, operating in the real world. Conjecture, speculation, and crystal ball inquiries do not suffice.”

Toxics Rule Bars Carbon Dioxide Standards

Clean Power Plan opponents also argued that the EPA was barred from regulating carbon dioxide from power plants under Section 111(d) because they are already subject to hazardous air pollutant limits under Section 112.

“In five analyses spanning three different administrations — in 1995, 2004, 2005, 2007 and 2014 — the agency consistently concluded that this text means that ‘a standard of performance under CAA section 111(d) cannot be established for any air pollutant ... emitted from a source category regulated under section 112,' repeatedly describing this as the text’s ‘literal' meaning,” they said.

Conflicting amendments to Section 111(d) were both signed into law when the Clean Air Act was last amended in 1990. The House language would prevent the EPA from regulating industrial sources under Section 111(d) if they are already subject to toxic pollutant standards under Section 112, as are power plants. The Senate's language only bars the agency from regulating the same pollutants under both sections of the act. While both amendments are reflected in the statutes at large, only the House language appears in the U.S. Code.

The EPA in its final rule had revised and expanded its interpretation of the conflicting Section 111(d) amendments, arguing that neither on their face barred the agency from regulating both hazardous air pollutants under Section 112 and carbon dioxide under Section 111(d) .

In response, the Clean Power Plan opponents again cited Scalia's opinion in Util. Air Regulatory Grp. v. EPA, where he reminded the EPA that it “may not rewrite clear statutory terms to suit its own sense of how the statute should operate.”

Rule Radically Changed From Proposal

Opponents of the rule also argued that the Clean Power Plan was fundamentally altered between its proposal and finalization, violating the public participation requirements of Section 307 of the Clean Air Act.

“Meaningful participation is impossible when EPA proposes one thing and finalizes something else entirely,” they said.

The EPA had proposed state requirements based on a complex formula that produced a blended emissions rate for both coal- and natural-gas fired units. However, the final Clean Power Plan standards are based on uniform national emissions rates for coal and gas power plants, an approach the EPA had previously rejected.

“Every other element of the rule flows from these two performance rates,”
opponents said. “Yet neither rate, nor even the concept of such a rate, was noticed in the proposed rule.”

The emissions rates used to set the final state requirements are so different from what the EPA had proposed that they cannot constitute “logical outgrowths” of the proposed rule in response to the public notice and comment process, opponents said.

“No one could have divined from EPA’s proposal that a final rule based on uniform, nationally-applicable performance rates was even a possibility, that units not even addressed in the proposal would be regulated, or that EPA would apply an entirely different methodology with new data in establishing those rates,” they said. “Such silence in a proposal does more than frustrate meaningful comment;
it assures no comment.”

Briefs from intervenors and amici in support of the petitioners are due Feb. 23. The EPA's response is due March 28.

To contact the reporter on this story: Andrew Childers in Washington at achilders@bna.com

To contact the editor responsible for this story: Larry Pearl at lpearl@bna.com

For More Information

The petitioners' brief on core legal challenges to the Clean Power Plan is available at http://src.bna.com/cLA.

Clean Power Plan Challenges

• Rather than setting performance standards for individually regulated power plants, the Clean Power Plan regulates how utilities can generate electricity, effectively mandating that coal-fired utilities will operate less, opponents say.

• The emphasis on shifting generation from coal-fired power plants to new renewable energy or gas-fired units oversteps state authority under the Federal Power Act.

• The EPA has offered different interpretations of “best system of emissions reduction” in rules for new power plants and the Clean Power Plan standards for existing units.

• The EPA has not demonstrated that its “best system of emission reduction” is readily available and reliable without being too expensive.

• Carbon dioxide emissions from power plants can't be regulated under Section 111(d) because those units are already subject to toxic pollutant limits under Section 112.

• The EPA significantly revised the Clean Power Plan between the proposed and final rules without offering an adequate opportunity to comment on the changes.

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